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A comparative performance analysis for the Islamic and conventional indices in response to GFC and COVID-19 outbreak

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Date
2021
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Abstract
A prominent issue regarding the stock market and shock crisis is whether the performance of Islamic index or conventional index is more stable, resilient and provides better shock resistance during the plunge in the market. Understanding how the indices respond towards the high level of volatility in the market is crucial for domestic and global investors, researcher, financial analysts, and policymakers. Two crises serve as the source of shock to analyse the performance of the indices. Thus, this study attempts to answer whether the Islamic equity market provides better performance con-sistently than its counterpart during the COVID-19 outbreak relative to the GFC. In particular, this research employed standardised time series method, multivariate Vector Autoregressive ( VAR ) model to evaluate the dynamic interaction between the indices and provide analytical interpretation from their long-run association, linear causal relationship from Granger-causality test and shock responses from Impulse Response Function ( IRF ). The main findings are: (i) the equity indices in Europe, UK, and USA show more substantial mean-reversion correction during GFC compared to COVID-19 outbreak, (ii) all indices in each country are highly correlated and move in the same direction, (iii) In general, there are not so much different in performance of IEIs and CEIs in both crises (iv) Islamic index shows better performance compared to its counterpart within a specific period, in a specific country, (v) investors who include Islamic index in the portfolio have the diversification benefits in the long run as they have non-cointegrated long run equilibrium with the conventional index, (vi) the conventional index responds towards the market shock instantaneously with greater magnitude in both crises compared to the Islamic index in a specific country.
Keywords
Islamic equity market , Performance , COVID-19 , Global financial crisis (GFC) , Project paper (MSc)
Citation
Mohd Hanifah, M. A. H. (2021). A comparative performance analysis for the Islamic and conventional indices in response to GFC and COVID-19 outbreak (Master dissertation). INCEIF, Kuala Lumpur. Retrieved from https://ikr.inceif.org/handle/INCEIF/3999
Publisher
INCEIF

Available in PDF format. Kindly email to kmc@inceif.edu.my to access the item

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